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Test your basic knowledge |
AP Microeconomics
Start Test
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Average Fixed Cost (AFC)
Cross-Price Elasticity of Demand
Average Variable Cost (AVC)
Marginal Resource Cost (MRC)
2. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Monopolistic competition long-run equilibrium
Determinants of Demand
Short run
Increasing Cost Industry
3. Exists if a producer can produce a good at lower opportunity cost than all other producers
Scarcity
Monopoly long-run equilibrium
Four-firm concentration ratio
Comparative Advantage
4. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Market power
Positive externality
Economic Profit
Surplus
5. When firms focus their resources on production of goods for which they have comparative advantage
Unit elastic demand
Cartel
Specialization
Market power
6. Models where firms agree to mutually improve their situation
Price Ceiling
Price floor
Collusive oligopoly
Price inelastic demand
7. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Necessity
Price floor
Monopolistic competition long-run equilibrium
Derived Demand
8. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Positive externality
Determinants of Supply
Determinants of elasticity
Cross-Price Elasticity of Demand
9. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Perfect competition
Substitute Goods
Scarcity
Derived Demand
10. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Negative externality
Least-Cost Rule
Short run
Cartel
11. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Increasing Cost Industry
Excess Capacity
Explicit costs
Least-Cost Rule
12. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Substitute Goods
Natural Monopoly
Producer surplus
Variable inputs
13. TR = P * Qd
Marginal Product of Labor (MPL)
Total Revenue
Perfectly inelastic
Necessity
14. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Market Equilibrium
Marginal Revenue Product (MRP)
Total Fixed Costs (TFC)
Total Product of Labor (TPL)
15. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Market power
Public goods
Absolute Advantage
Marginal Benefit (MB)
16. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Absolute Advantage
Dead Weight Loss
Economic Growth
Necessity
17. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Profit Maximizing Rule
Income Elasticity
Substitution Effect
Perfect competition
18. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Opportunity Cost
Productive Efficiency
Marginal Productivity Theory
Free-Rider Problem
19. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Normal Profit
Increasing Cost Industry
Substitution Effect
Explicit costs
20. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Complementary Goods
Monopsonist
Unit elastic demand
Profit Maximizing Resource Employment
21. The additional cost incurred from the consumption of the next unit of a good or a service
Explicit costs
Marginal Cost (MC)
Constrained Utility Maximization
Total Revenue
22. 0 < Ei < 1
Necessity
Complementary Goods
Break-even Point
Spillover benefits
23. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Increasing Cost Industry
Inferior Goods
Luxury
Diseconomies of Scale
24. Total product divided by labor employed. APL = TPL/L
Determinants of Supply
Monopolistic competition long-run equilibrium
Incidence of Tax
Average Product of Labor (APL)
25. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Perfectly inelastic
Relative Prices
Economics
Constrained Utility Maximization
26. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Oligopoly
Determinants of Supply
Shutdown Point
27. The rational decision maker chooses an action if MB = MC
Marginal Analysis
Fixed inputs
Implicit costs
Unit elastic demand
28. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Income Effect
Law of Increasing Costs
Law of Supply
Total Fixed Costs (TFC)
29. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Perfectly elastic
Marginal Product of Labor (MPL)
Opportunity Cost
Monopolistic competition long-run equilibrium
30. ATC = TC/Q = AFC + AVC
Opportunity Cost
Average Total Cost (ATC)
Production function
Marginal Revenue Product (MRP)
31. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Shutdown Point
Economics
Monopolistic competition long-run equilibrium
Excess Capacity
32. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Utility Maximizing Rule
Marginal Product of Labor (MPL)
Positive externality
Resources
33. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Total Fixed Costs (TFC)
Income Elasticity
Comparative Advantage
Accounting Profit
34. Occurs when LRAC is constant over a variety of plant sizes
Constant Returns to Scale
Price inelastic demand
Profit Maximizing Resource Employment
Price discrimination
35. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition long-run equilibrium
Resources
Monopolistic competition
Natural Monopoly
36. Ed > 1 - meaning consumers are price sensitive
Surplus
Price elastic demand
Monopoly long-run equilibrium
Absolute prices
37. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Decreasing Cost industry
Excess Capacity
Law of Supply
Marginal tax rate
38. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Perfectly elastic
Variable inputs
Marginal Resource Cost (MRC)
Price discrimination
39. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Perfect competition
Marginal Productivity Theory
Inferior Goods
Monopoly long-run equilibrium
40. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Production function
Long Run
Market Equilibrium
Incidence of Tax
41. The imbalance between limited productive resources and unlimited human wants
Total variable costs (TVC)
Price elastic demand
Break-even Point
Scarcity
42. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Non-collusive oligopoly
Substitution Effect
Producer surplus
Average Fixed Cost (AFC)
43. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Income Elasticity
Dead Weight Loss
Negative externality
Comparative Advantage
44. Exists if a producer can produce more of a good than all other producers
Absolute Advantage
Unit elastic demand
Determinants of Labor Demand
Monopolistic competition
45. A good for which higher income increases demand
Normal Goods
Monopsonist
Total Product of Labor (TPL)
Decreasing Cost industry
46. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Substitution Effect
Determinants of Demand
Productive Efficiency
Profit Maximizing Resource Employment
47. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Economies of Scale
Law of Diminishing Marginal Utility
Negative externality
Price discrimination
48. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Dead Weight Loss
Shortage
Constrained Utility Maximization
Average Product of Labor (APL)
49. A firm that has market power in the factor market (a wage-setter)
Increasing Cost Industry
Price Ceiling
Four-firm concentration ratio
Monopsonist
50. The practice of selling essentially the same good to different groups of consumers at different prices
Negative externality
Monopolistic competition long-run equilibrium
Total Revenue
Price discrimination